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Tuesday, September 25, 2012, 16:15

Updated: Fitch keeps Malta's rating at 'A+'; Stable outlook

Updated - Adds PL statement - Ratings agency Fitch has affirmed Malta' Long-Term foreign and local currency Issuer Default Ratings (IDRs) at 'A+'. The rating outlooks on both Long-term ratings are Stable. Fitch has also affirmed Malta' country ceiling at 'AAA' and its Short-term foreign currency IDR at 'F1'.

"The rating affirmation reflects Fitch's view that Malta will maintain a general
government primary budget surplus in 2012-14. This would put public debt on a
declining path from 2013. This implies that the incumbent government will take
necessary action to ensure that the budget deficit remains below 3% of GDP this year and that any new government emerging from the elections will set out a credible multi-year fiscal consolidation programme that incorporates the impact of ageing," Fitch said.

"The agency's baseline assumes that the government will pass the budget and that there will not be early elections. However, its parliamentary majority is fragile and there is a risk that the budget will not pass. In the event of early elections the fiscal slippage is likely to be wider than Fitch's baseline.

"A fiscal slippage within 3% of GDP would be within the tolerance of the rating. A higher fiscal deficit could cause public debt to reach 76% of GDP in 2012."

Fitch added that is expects public debt to peak at 74% of GDP in 2013 and to decline gradually thereafter.

It said that according to the baseline path (which assumes continued but moderate fiscal adjustment from 2013 onwards), the debt/GDP ratio could fall to 69% by 2020, assuming a primary surplus of 1% and potential growth of 1.5% over the medium term. A material deviation from this baseline could lead to a negative rating action.

The adoption of a balanced budget rule envisaged by the fiscal compact is included in the baseline.

The agency warned that the main long-term threat to the public finances is the unreformed pension system. Pension expenditure is projected to increase from 10.4% of GDP in 2010 to 15.9% of GDP in 2060.

"Failure to implement reform and secure the long-term sustainability of
the public finances could lead to a downgrade in the medium-term," it said.

It explained that the baseline envisaged that the election outcome would not disrupt the medium-term objective of fiscal policy, which is to realise a balanced central government budget and stabilise the public debt ratio.

"Should post-election fiscal policy significantly fail in achieving this, it could have negative rating implications. A new intensification of financial stress, particularly if it led to a deeper and more prolonged recession than currently expected by Fitch, would also hurt the creditworthiness of Malta.

"Conversely meeting or exceeding fiscal targets, in conjunction with sustained and balanced economic growth, a reduction in the public debt ratio and an easing in the eurozone crisis could lead to positive rating action."

Earlier this month, Moody's rating agency affirmed Malta's A3 rating and negative outlook. It praised the government for fiscal consolidation, particularly for bringing the deficit below 3% at the end of last year but warned of possible slippage later this year.

Fitch has 'burst GonziPN bubble' - PL

The Labour Party said this evening that Fitch ratings agency in its country report on Malta made a clear declaration that burst the Gonzi PN bubble which cast doubts on a future Labour government's financial policies. 

In its report Fitch said: "The rating affirmation reflects Fitch's view that Malta will maintain a general government primary budget surplus in 2012-14. This would put public debt on a declining path from 2013. This implies that the incumbent government will take necessary action to ensure that the budget deficit remains below 3% of GDP this year and that any new government emerging from the elections will set out a credible multi-year fiscal consolidation programme that incorporates the impact of ageing."  

The PL said the last to speak irresponsibly was Simon Busuttil, the prime minister's special envoy, who even said the country could need a bailout (if Labour is in government). Such declarations  were not only unfounded, but harmful to the country, the PL said, adding that Fitch had not taken such declarations seriously.

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Alfred Vassallo

Sep 26th 2012, 09:25

And they say that the PL is all Gloom & Doom....Give it a rest man......people can come to their own conclusion. This tactic of scaremongering was also used in the Divorce referendum and the people showed Gonzipn their maturity. But it seems some people never learn.

Joe Muscat

Sep 26th 2012, 09:32

How on eart did you come up with this ridiculous nonsense. Oh! so the 6 billion debt (and counting) doesn't worry you? That's ok and acceptable? But now we'll blame Labour for it......What a load of rubbish! The signs have been clear for the past 4 years that this government is overspending, making certain friends only, Rich, and totally ignoring it's people. A PL win in the elections will b a Godsend. No use adopting the irresponsible cliche of "if PL is in government we're doomed." Are you totally blind to the situation today? And if we need a bailout....why? Because GonziPN has spent everything and beyond....

Peter Simpson

Sep 26th 2012, 09:23

@ Mr Joseph Huber. Il-morons huma dawk li belghu l-gidba 'tal- finanzi fis-sod, u serhan il-mohh' ! Kieku ma kienetx gidba, dawk is-slogans deceitful; kieku illum, m'ahniex naghtu kaz wisq x'tghid Fitch, u nezaminaw kull koma u fullstop tal-credit rating agency!

Alfred Vassallo

Sep 26th 2012, 09:06

Quote ''Should post-election fiscal policy significantly fail in achieving this''

But don't you get it Gianninu.... Fitch was alluding to the pn, if God's forbid they come again into power!

That's why they included that statement. Shame that some people needs spoon feeding to grasp the whole meaning behind THINLY veiled statements.

Joe Muscat

Sep 26th 2012, 09:35

Totaly agree with you on MASSIVE problems left behind by GonziPN

Eddy Privitera

Sep 25th 2012, 22:44

jOE MICALLEF: FITCH HAS CONFIRMED THAT A PL GOVERNMENT HAS ITS TRUST ! UNLIKE LAWRENCE GONZI WHO HAS LOST THE TRUST OF A NUMBER OF HIS OWN MPs !

B. Cachia

Sep 26th 2012, 00:37

Well, our Eastern European and Baltic partners appear to be making much more progress than we are in catching up with the Western Europeans. Currently, we have a GDP per capita that's essentially Eastern European, combined with a growth rate that's Western European - the worst of both worlds. And those who are outpacing us aren't doing it out of sheer good luck, they're doing it by creating a business-friendly environment with low taxes and an emphasis on innovation.

Paul Bajada

Sep 25th 2012, 20:04

better the Joseph Muscat you do not know than that Gonzi which we know!

B. Cachia

Sep 25th 2012, 19:02

That's a 'primary surplus', i.e. before payment of interest on existing debt, and even that is not a description of something that's already happening, it's merely the assumption Fitch are making for the purposes of their projection. Once the interest payments are taken into account, this turns into a deficit that's still below 3%. Of course, if the primary surplus is lower, or if interest rates were to rise at some point in the future, that 3% could easily become 5% or 6%.

Interestingly, the 3% deficit is not some ideal level either. Assuming our long-term GDP growth rate of 1.5% and inflation of 2% (consistent with the ECB's target), a 3% annual deficit would mean that our debt would stabilise at just under 100% of GDP at some point in the distant future. Fitch are a bit more optimistic than that but, given a choice, I'd go for past experience rather than for projections based on what the government says it will do.

Alan Xuereb

Sep 25th 2012, 19:49

Is the opposition offering something else from BLA BLA BLA!

William Caligari

Sep 25th 2012, 19:27


Mr. Grech,

Spjega ghaliex Simon Busuttil qal li fiz-zmien sentejn taht il PL
Malta jigrila bhal Grecja u titlob Bailout? Xi jfisser dan?

...............X'tahwid dan???................

Peter Shaw

Sep 25th 2012, 22:04

Qed tghid cucata . Mela s 7000 kolla kwalificati al Smart City ?? u hallina!!!

Peter Murray

Sep 25th 2012, 18:10

That feather in the cap looks like a white one to me.This baseline projecture is based on "assumptions" please note and its funny how this agency is regarded as a viable and upstanding good judge when finding in Malta's favour but its findings are quickly denigrated and treated as insignificant when they go the other way.

B. Cachia

Sep 25th 2012, 18:20

Credit ratings say little about whether a country is on the right track or not. They are concerned exclusively with the Government's ability to pay back its debts, and in Malta's case this has never been in doubt. In other words, they're saying that the government is not bankrupt, they're not saying it's doing great. To see whether we're doing great or not, you'd have to take a look at our GDP growth rate and at our current GDP per capita. The former is pathetically low (under 1.5% over the past ten years), and the latter is low enough to put us at the bottom of the table in Western Europe.

joseph saliba

Sep 25th 2012, 18:07

Dear Daniel, nothing to be afraid of as 'It explained that the baseline envisaged that the election outcome would not disrupt the medium-term objective of fiscal policy, which is to realise a balanced central government budget and stabilise the public debt ratio.' So 't has got nothing to do with Franco. And you can also vote PL in power with with your mind at rest vis-a-vis the country's financial situation.

R. Saliba

Sep 25th 2012, 17:58

You are right. You are not an economist.

joseph saliba

Sep 25th 2012, 18:12

So many people from both sides of the political spectrum are more than positive (obviously for different reasons) that coming next elections a Labour administration will discover a great black hole in our finances if voted into power.

Karl Abela

Sep 25th 2012, 18:17

Michael. What labour fails to tell you is that our deficit is local that means our local banks are actually thriving so the interest paid is remaining within our shores. Other countries are borrowing from others because their banks are bust.

Get your facts sorted before accusing someone of fooling around.

Noel Abela

Sep 25th 2012, 18:32

@ Karl Abela
Right on the dot my friend, so why did Simon Busuttil say that should the PL be elected Malta would need a bail out in two years time. Bailed out countries were in the same position as you outlined. Prosit titkellmu kif jaqblilkom.

Mary Ann Borg

Sep 25th 2012, 22:44

Yes Michael Magri, our 'dept' is increasing by tens of millions. That's what Super 1 and l-Orizzont say, so we have to believe it . Fuq kollox who are these Fitch? Tghid ma jifhmux daqs l-istilla Lejburiista Edward Scicluna li qalilna li l-ekonomija ta' Mintoff fejn konna nittalbu ghac cikkulta kienet tajba ghal Malta u l-Maltin?

Michael Magri

Sep 26th 2012, 20:29

@ R Saliba.. Yes i am not an economist.. But from the looks of it, you are not either, right...!!

@ Karl Abela.. What you said is a well known fact known by all, ok.. But what GonziPN is failing to tell US ALL is HOW and WHEN is he going to repay those huge depts, being our money or not my friend. Is he going to invent and raise more taxes or will he then start borrowing from other countries..!! Because, i am more than sure that one fine day this baloon is going to explode and is going to hurt many people, if we don`t take care of it quickly..!! And another thing.. EU`s laws and regulations are getting very strict on such depts..!

@ Mary Ann Borg.. That our depts are increasing monthly is a well known fact as, for your information, such statistics are published by our National Statistics Office.. Got It ..!! Now as far as Prof Scicluna is concerned, its a well known fact that he is a well known figure in his profession ALL OVER THE WORLD for his capabilities and you just cannot deny that.. Oh.. Perhaps its a case of `sour grapes` for GonziPN right, for not joining his `KLIKKA`.. Hallina trid please.. Prof Scicluna huwwa l-ghira ta kulhadd..!! IMQAR GonziPN GHANDU NOFS WIEHED BHALU Mari Hi.....!!!!

Joseph Portelli

Sep 25th 2012, 17:19

Hallina Sur Smith!!!! Electioneerging mal-fitch! Anqas taf x'int tghid. Dan sinjal li d-doom and gloom ta' Joseph tieghek huwa biss duhhan. F'dawn l-ahhar snin, Malta ghamlet passi kbar 'il quddiem fl-ekonomija komporat ma pajjizi ohra girien taghna. Sewwa smajna mill-parir ta' dak li qal li messna qed nimxu bhal Cipru! Jehtieg li lkoll nifthu sewwa ghajnejna u nibdew nahsbu b'mohhna. Gvern tal-PN ifisser ekonomija li timxi 'l quddiem.

joseph borg st john

Sep 25th 2012, 18:01

jealousy gets you nowhere.

A Trapani

Sep 26th 2012, 02:32

Unbelievable dawn in nies

B. Cachia

Sep 25th 2012, 18:14

Lucienne, A+ in Fitch's ratings system is not like the A+ teachers give to very good students. It's the equivalent of the 'C' that teachers give to mediocre students. The equivalent of an 'A' student in Fitch ratings would be 'AAA'. 'A+' means that one is at the upper end of the third grade.

Mr Stefan Kottmann-Soler

Sep 25th 2012, 19:31

Oh come on B. Cachia. Triple A countries are Germany. Malta is not Germany. But tiny Malta has a better rating than Italy, the third largest economy in Europe! If you have a look at the different grades you will find that A+ is definitely not a third rate grade. It is above the Bs and above non-investment grade bonds. Cs are the mediocre ones because they are the 'junk bonds' or the 'non-investment grade' bonds. I suggest you read up on credit ratings.

B. Cachia

Sep 25th 2012, 21:44

@ Stefan Kottmann-Soler: Well, as you know, 'A' is the third level. Sure, 'A' is better than 'B', but that still leaves it as the third level. Small countries can be 'AAA' or 'AA' if they do the right things and avoid debt. Luxembourg is 'AAA', and they got there through prudent and business-friendly government.

As for the Germany-Malta comparison, I'm not sure it's very relevant, the scale being so different (as you point out). For a small and undiversified economy like ours, a government debt of 75% of GDP is quite high, whereas it would be much more sustainable for a larger, more diversified economy.

C Cassar

Sep 25th 2012, 17:15

What utter rubbish. Malta's economy is very good considering the mess such countries as the UK are in. The 'working classes' as you put it haven't had it so good in Malta's history. Why is that such a tough pill for you to follow? Forget the politics and feel very lucky the economy is so good. This has been certified by a number of well recognised institutions, so you can remain in denial if you so wish.

Charles Cremona

Sep 25th 2012, 17:29

C.Cassar: As usual you can't help having a dig at the UK but let me remind you that despite economic difficulties, the UK is one of a handfull of countries left with AAA rating which is better than the US and your beloved France.

Charles Grixti

Sep 25th 2012, 17:49

@C.Cassar

Yes, Malta a country the size of a small city with no resources and a hugh deficit with a standard of living that is gowing down for the majority of the population on a dialy basis, yes of course, but it has this positive rating (and just who are these rating agencies (recognised institutions) and under whose control, is what should be asked here. The truth will surprise you). I believe this when pigs fly.

As for the 'economy' beign so good, let me tell you after an absence of 10-years from Malta, I thought I was goind to return to an EU paradise, instead it was more like the third-world . How much the standard of living has deteriorated and digressed. Of course, you who live here permaanently cannot perceive this instantly, it is called the 'boiling frog' syndrome. But believe me, you have been taken down my friend. Shame for I feel sorry for my island home (and do not think this is political, it is a world-wide neo-con agenda that is being followed and I do not forsee any difference, except on superficial issues between the PN and the PL).

C Cassar

Sep 25th 2012, 18:09

@Charles Grixti:
Firstly I have lived in many countries and still visit many for extended periods. Malta has improved immeasurably since becoming an EU member. The only thing holding it back in most areas are it's own citizens who constantly look after themselves in a selfish and greedy manner. This is reflected in the environment, driving standards and their generally behaviour. It has nothing to do with governments or authorities but simply a long standing selfish culture.

The current government has done a sterling job considering it has to put up with citizens who don't really care for their own country and who rarely lift a finger unless it's making them some money.

As for your expectations of an EU paradise, well that doesn't exist anywhere but the EU has had a hugely positive effect on Malta and it's economy and has been certified over the last months as being in excellent shape. If you can't except that then fine but I do my research and put more faith in them rather than you when it comes to economic discussions.

joseph borg st john

Sep 25th 2012, 18:11

Charles why don t you go back where you came from if things are so bad here ? go get a life.

C Cassar

Sep 25th 2012, 18:14

@Charles Grixti:
Actually, it sounds like you have sour grapes because Malta IS doing so well even though it's own people hold it back.

Charles Cremona

Sep 25th 2012, 19:18

Charles Grixti: You are right my friend, I was absent for 46 years and I now have homes both here and the UK, when I use to come here on holiday it didn't seem that bad because you tend to stick to the good areas, however, when you come to live here you realise how backward this place is, it has nothing to do with politics, its as you said like living in the third world.

Charles Grixti

Sep 25th 2012, 19:28

@C. Cassar

it is not sour grapes as you call it but a big DISAPPOINTMENT. I would love for my country to be doing well but if you just listen to the spin and see only through political blinkers, you would fail to notice the dirty environmmnet, sub-standard food and lack of choices in supermarkets and the general look of hopeless desperation on the faces of the Maltese as they trudge back and forth to their underpaid jobs. Progress my foot.

Charles Grixti

Sep 25th 2012, 19:38

@Joseph Borg St. John

But why do so many people get offended and resort to taking things personally when it is pointed out to them that 'the emperor has no clothes'?

Mr Joe Micallef

Sep 25th 2012, 17:04

Probably he wil say "dawn fitch jifhmu! Jien,joey u eddie econimisti primi tal-livin wejg?

Charles Cremona

Sep 25th 2012, 17:07

The three stooges of the labour financial world are probably in a panic consulting with Joseph on how to counteract this excellent report by Fitch, i'm sure they will come out with the usual negative crap, as they have nothing else to offer.

Charles Grixti

Sep 25th 2012, 17:58

@Charles Cremona

Just to let you know how unbiased and credible these 'rating agencies' can be, suffice it to note that they never touched the US ratings, nothwithstanding the fact that it has the worst deficit of all European countries combined. He that pays the piper calls the tune.

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